"We see the severe impact that this drought is beginning to have on jobs and livelihoods"

* Western Cape faces 20 percent cut in farm output

* Fruit exports to Europe down, wheat crops shrink

* Cape Town going underground for extra water

CAPE TOWN, March 1 (Reuters) - A severe drought afflicting South Africa's Western Cape province is expected to cut agricultural output by 20 percent this year, decimating the wheat crop and reducing apple, grape and pear exports to Europe, officials said on Thursday.

South Africa has declared a national disaster in its southern and western regions including Cape Town, freeing extra funds to tackle the crisis. Cape Town itself faces "Day Zero" on July 9 when its taps could run dry.

Alan Winde, Western Cape's economic opportunities minister, projected losses of 5.9 billion rand ($495 million), up from a previous estimate of 4.9 billion, due to record wheat losses and a strong currency that has crimped exports.

"If we compare the past quarter to the same time period last year, we see the severe impact that this drought is beginning to have on jobs and livelihoods," Winde said, adding that 30,000 jobs had been lost.

The drought has forced the Western Cape farm sector to cut water use by 60 percent, denting output, he added.

Among the worst hit crops is wheat, whose output is projected to plunge to 586,000 tonnes in 2018 from 1.1 million tonnes harvested in the previous year - a 2.4-billion-rand loss for the grain sector.

South Africa's total wheat harvest has been put at 1.52 million tonnes in 2018, down from 1.90 million tonnes in 2017. This will force a more than 100 percent rise in wheat imports to 2.1 million tonnes in 2018 from 935,000 tonnes last year, industry body Grain SA said on Thursday.

Grain SA senior economist Corne Louw said South Africa has been a net importer of wheat for some years, mainly from Russia, Lithuania and other east European countries.

The drought is also expected to curb exports of South African apples, pears and grapes, mainly to Britain and other European Union states, as well as Russia and the Far East by 13-20 percent this year.

Western Cape's famed wine industry has also struggled under the prolonged drought, with forecasts indicating the next grape harvest could be the smallest since 2005.

South Africa normally exports around 440 million litres of wine annually and is the world's ninth largest producer.

Cape Town, whose picturesque ocean front location with mountain backdrop is a major tourist draw, expects to run out of water on July 9 unless residents can stick to a rationing plan limiting them to a maximum of 50 litres per person per day.

The city is drilling for underground water in three locations to help rebuild supplies and hopes this will yield a peak of 150 million litres a day by the end of 2018.

A series of restrictions imposed over the past three years has cut collective consumption by over half since 2015, as city officials look to see out the hot summer months into winter, when rain normally replenishes reservoirs.

"If each one of us continues to use 50 litres a day, we can not only beat Day Zero this year but also be in a better position to avoid it next year," said Deputy Mayor Ian Neilson. (Reporting by Wendell Roelf Editing by Ed Stoddard and Mark Heinrich)